The Bangko Sentral ng Pilipinas (BSP) approved Producers Bank’s application as an Accredited Rural Financial Institution (ARFI) last February 07, 2012. As an ARFI, Producers Bank can now accept deposits and investments from universal and commercial banks that need to comply with mandatory lending to the agriculture and agrarian (agri-agra) sectors.
A bank must pass the qualification criteria under Subsection X341.8 (B) of Circular No. 736 to be an accredited RFI. These qualifications are as follows: (i) total loan portfolio is greater that its total investments and (ii) average credit exposure to agri-agra must be greater than its exposure to other economic sectors. These shall be computed based on average of the last four quarters preceding the Bank’s application for accreditation.
In a media release, BSP stated that RFIs act as direct conduits to the agriculture sector and agrarian reform beneficiaries by channeling the funds specifically allotted by other banks for the program. This gives RFIs a critical role in the funding chain.
Under the Mandatory Agri-Agra Credit under RA no. 10000, a commercial bank must set aside at least 25% of their total loanable funds for agri-agra credit in general, of which at least 10% of the loanable funds must be made available for agrarian reform beneficiaries.
Unlike before, loans of banks to housing and education sectors were no longer considered alternative forms of compliance. The revised law specifically states that compliance means extending loans to borrowers who will use the money for initiatives that will also benefit the agriculture sector.
Investing in special deposit accounts of BSP-accredited RFIs or wholesale lending granted to BSP-accredited RFIs are ways for commercial bank to comply in the new Agri-Agra law.
In connection to the above, Producers bank is offering a special deposit product tagged as “Select Deposit Account (SDA)”. The objective of launching SDA is to penetrate and grab a bigger share of the deposit market where Producers Bank operates, thereby generating funds for relending to the agricultural sector of the community. The target market of the SDA are High Networth Individuals (HNIs), selected rural banks, cooperatives, non-government organizations (NGOs), foundations & lending investors who are interested to earn higher interest for their investable funds.